AAPL is a great example of how growth stock investing is not a very good strategy. Almost by definition, when growth companies mature, growth rates fall and prices sink, especially if the slowing growth rate is unexpected. The stock is trading at about $400 down from $700 and currently has a P/E ratio of about 9x and I heard today that its free cash flow multiple is very low as well. I don't normally buy stocks, and I probably will not buy this one. With that said, at a time when investors are selling everything, AAPL might prove to be a good long term investment or NOT. It is fun to think about buying it, though.

I am just happy that I bought some in my pre-Boglehead days at around $70/share, sold some at $300/share (enough to cover my initial investment), and sold half of what was left at $600. Now the rest will remain forever, regardless of what the company does. At least in the past few months, that includes some dividends. Apple was one of my first individual holdings and just holds some sentimental value to it beyond its market value and that's why I keep it.

Too scary for me. That's a heck of an investment to buy enough to make any real impact. I have a coworker who bought it at around $650ish. You could buy it now and make some good money, or buy it now and have it go to $200 or $300. Who knows?

I believe some of the things from CANSLIM. One of them seems to be almost universal:

Stock appreciation is related to earnings growth. When earnings stop growing, the stock becomes unpopular (and tanks). It will stay unpopular until earnings growth (or some other earnings *story*) returns.

Apple's earnings growth is negative. Earnings growth explains the drop. It is not a value unless you think earnings will materially increase. [I have no opinion!]

If Apple releases a a new gadget, or otherwise finds a way to accelerate earnings growth, it will go up. If apple cannot change it's earnings growth trajectory, it's probably not going anywhere.

This might be more controversial, but i've backtested various strategies... Each company is different, but on average, it pays to buy a stock that has already gone up. ie... Buy on a 100 day high instead of a new low. For these individual stocks, PM, etc. Momentum is real. Stuff going down, tends to continue.

None of this is true for broad indices. It seems that they are a completely different animal.

sometimes I think we should have a separate sub forum for stock picking/guessing.

obviously this site isn't geared towards guessing what aapl will do.

that said, im sure a bunch of us who call ourselves bogleheads own some quanity of some individual stocks. Sometimes its bc its from before we saw the light, sometimes its a very small percentage of our investment which some consider play money, sometimes we aren't certain that previous research still applies and sometimes we just aren't really listening to the evidence that we know.

Id like it to go up since its a part of many broad based indexes. What it will do, I don't know and I seriously doubt anyone here (or at other sites) really knows. They may guess right but not likely that they know.

SVariance1 wrote:... The stock is trading at about $400 down from $700 and...

I can think of many things which were once worth more than they are today....tulips are only one of the most extreme examples. I'm pretty sure there's some behavoral things going on there where once it's reached a point (oil, gas prices, many upwardly moving financials) it's 'broken through' and we're more willing to accept that number again, etc. But I'm also pretty sure that unless your algorithm is based on psychological anchoring, there's little use in that "once was at" number to value something in the future.

roymeo

The sewer system is a form of welfare state. |
-- "Libra", Don DeLillo

Since I believe in efficient markets, I think of it as a diversification trap.

Looking at AAPL vs VTI, there's no reason to believe that AAPL is undepriced vs the rest of the market. But AAPL takes you on rides of 40% up and down depending on the whims of teenagers (or something). If you're okay with that kind of volatility, 2x VTI will give you double the expected return of 1x AAPL.

And yes, looking in the rearview mirror the problem is that the iDevices are simply not as dominant / sexy as they were even a year ago. The remains of Blackberry and Nokia are a cautionary story to everyone.

There was an article a year or so ago titled "aapl and xom, there only two stocks you need?" It remimded me of an article I read by money around 2000 which had ene and dell as 2 of the top 5 stocks "you must own for the next decade." I viewed that as a good omen.

That is usually a good predictor of of a bad outcome but what was Dell's valuation in 2000? I would think that is was high. High valuations do not usually lead to good future returns. Valuations matter a lot.

The reason to own Apple is that you're willing to make a bet on its future performance that's different than the bet the broader market is making. The market, like you, already knows that AAPL is priced at a low P/E, has a high book-value-to-share, has tremendous cash flow, enviable GMs, etc. But neither you nor the market knows what will happen in the future. The market is pricing Apple (relative to the rest of the market) with the understanding that all of these measures will decline. If you think different (ha!), then buying AAPL now makes sense. But only if you recognize it as a bet on unknowns and don't wager more than you can stand to lose if you turn out to be wrong.

I read a lot and I don't believe much. I do believe that earnings growth is the driver. I also believe that having a "sell rule" or sell point is just as important as a buy point, including which stock to buy.

Stocks have crazy moves, but when a stock is done, it is really done. Even if the company survives and prospers, the stock may literally not move anywhere for a decade. Look at big cap tech. it hasn't been overvalued for a long time, but many individual companies have been range bound for a decade. They have been stuck in the mud for a long time. Lots of risk, little reward. Most stocks operate this way (which is why indexing is so smart!)

My theory about sell rules is risk related. A sell rule lowers risk. Individual stocks are significantly more volatile/dangerous than indices. a sell rule minimizes losses and thus lowers risk. This is good for individual stocks, where 50% blowups are fairly frequent. 80% or 100% are less frequent, but do happen. Stocks often don't bounce back (ever). They have a different dynamic range than indexes.

In broad indices,where the price range is significantly more bounded, sell rules, so far, have translated into lower returns. However, there is no guarantee. We've always bounced back, but nothing is written in stone that US stocks can't go down and stay there.

BestWishes wrote:We were in Tokyo and Hong Kong earlier this year and Galaxy is very popular there, much more so than iphone.

Apple is currently dominating smartphone sales in Japan, so your observations in Tokyo likely are abberational or reflect older sales patterns. I'm not sure about Hong Kong.

In the first quarter of 2013, Apple's iPhone accounted for nearly 40 percent of all Japanese smartphone sales, according to market research firm IDC. Sony over the same period accounted for 13.3 percent of smartphone sales in its home market.

zakinov wrote:This concerns me as well because although i don't plan to buy individual stocks for quite some time, Apple is the top holding in VTI and other big core funds.

It may be the top holding, but the weight is only about 2%.

I'm not optimistic regarding Apple. It's a one product story, and that product is losing market share and margins are declining. It was a great run while it lasted, but like all tech titans with a mature product (Microsoft etc) the story is finding another blockbuster is very hard.

menlo wrote:
Apple is currently dominating smartphone sales in Japan, so your observations in Tokyo likely are abberational or reflect older sales patterns. I'm not sure about Hong Kong.

In the first quarter of 2013, Apple's iPhone accounted for nearly 40 percent of all Japanese smartphone sales, according to market research firm IDC. Sony over the same period accounted for 13.3 percent of smartphone sales in its home market.

"A BCN report released on the same day, though, found that the last four weeks have seen a reversal in Sony's fortunes, according to Bloomberg. Tokyo-based BCN, which relies on sales figures from more than 2,000 retail outlets, found that Sony smartphones represented 36 percent of shipments in the past month, with Apple's share dropping to 25 percent over the same period."

"In a matter of weeks Sony has reversed fortunes in its home market supplanting Apple as the top supplier of smartphones in Japan. In just a month the Tokyo-based company has more than doubled new domestic smartphone sales and now accounts for 36 percent of deliveries. In the same period Apple's share has fallen to about a quarter."

"A BCN report released on the same day, though, found that the last four weeks have seen a reversal in Sony's fortunes, according to Bloomberg. Tokyo-based BCN, which relies on sales figures from more than 2,000 retail outlets, found that Sony smartphones represented 36 percent of shipments in the past month, with Apple's share dropping to 25 percent over the same period."

Fair enough. Although it still doesn't appear that Samsung Galaxy is in the running in Japan.

I worked for Apple for years and had the good fortune to be able to purchase a ton of stock @ ESPP pricing. I sold all of it last year when it was in the high $600's. Partly due to the "insight" I had from current employees, and partly because I was tired of the volatility. You may make money on Apple stock, but you will probably get an ulcer in the process Now I am pretty happy as a minimalist Bogle investor, my angst is reduced (not entirely, but I'm learning to not look). If you buy Apple stock, you really need to monitor it and work the pre-post earnings announcements to profit the most. Buy and hold with Apple can kill you these days.

nedsaid wrote:A computer geek at work told me that Samsung actually has better technology for its smart phones than does Apple. If that is true, trouble is ahead

This may certainly change, but one thing I noticed was that Apple laptops (Air and Pro) are in a class by themselves. They are wonderfully designed, and I don't see a comparable quality laptop being produced that is also low enough in price to make it a no brainer decision to go with an alternative.

nedsaid wrote:A computer geek at work told me that Samsung actually has better technology for its smart phones than does Apple. If that is true, trouble is ahead

This may certainly change, but one thing I noticed was that Apple laptops (Air and Pro) are in a class by themselves. They are wonderfully designed, and I don't see a comparable quality laptop being produced that is also low enough in price to make it a no brainer decision to go with an alternative.

Well, speaking from a hard core geek point of view I have exactly the opposite opinion of these laptops. They are often extremely difficult to repair, upgrade or make enhancements to, which rules them out for my needs.

Warren Buffett, who probably knows more than all of us on individual stock investing, and who reads hundreds of annual reports a year, noted he would not be investing in Apple.

It appears he's changed his mind. He bought another 75 million shares 1st quarter, likely making it his top holding. The news has propelled AAPL to new highs this morning. I will continue to hold, along with Warren.

Warren Buffett, who probably knows more than all of us on individual stock investing, and who reads hundreds of annual reports a year, noted he would not be investing in Apple.

It appears he's changed his mind. He bought another 75 million shares 1st quarter, likely making it his top holding. The news has propelled AAPL to new highs this morning. I will continue to hold, along with Warren.

Isn’t that incredible!

John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" |
|
Disclosure: Three Fund Portfolio + U.S. & International REITs

Warren Buffett, who probably knows more than all of us on individual stock investing, and who reads hundreds of annual reports a year, noted he would not be investing in Apple.

It appears he's changed his mind. He bought another 75 million shares 1st quarter, likely making it his top holding. The news has propelled AAPL to new highs this morning. I will continue to hold, along with Warren.

In an interview shortly after Berkshire Hathaway disclosed its initial position in AAPL Warren Buffett said he began buying the shares because he considered AAPL to be a consumer products company as well as a technology company. He certainly understands consumer products.

Warren Buffett, who probably knows more than all of us on individual stock investing, and who reads hundreds of annual reports a year, noted he would not be investing in Apple.

It appears he's changed his mind. He bought another 75 million shares 1st quarter, likely making it his top holding. The news has propelled AAPL to new highs this morning. I will continue to hold, along with Warren.

In an interview shortly after Berkshire Hathaway disclosed its initial position in AAPL Warren Buffett said he began buying the shares because he considered AAPL to be a consumer products company as well as a technology company. He certainly understands consumer products.

This doesn't seem to explain the IBM investment (which has now been dumped). I don't think IBM is in consumer products, more in business tech service solutions.

AAPL was the last stock I sold before I moved to a full Boglehead portfolio. I was strongly bullish on Apple even as I sold it. I had about 10% of my entire net worth in AAPL at the time I sold it. I have made a lot of money on the stock over the years, though I could have made a lot more (bought and sold too often). My original purchase of AAPL was at $90 or thereabouts PRE 1:7 split. Too bad I "locked in my amazing gains" a year later.

I think AAPL is still a great investment. I am happy to own it as ~2-3% of the US portion of my stock portfolio. I think it will go higher still and will continue to be a cash printing machine for atleast the next few years.

The reason I don't own it individually is for two reasons :
1) Slippery slope into the whole buying individual securities and selling to market time, and facing fear, regret, second guessing, and risk of underperformance and all that.
2) I don't hold my own opinion in high enough regard to put my money where my mouth is. I am quite confident Apple will do great, specifically, out perform the S&P 500 as a whole.. but who cares what I think? I have no crystal ball.

AAPL was the last stock I sold before I moved to a full Boglehead portfolio. I was strongly bullish on Apple even as I sold it. I had about 10% of my entire net worth in AAPL at the time I sold it. I have made a lot of money on the stock over the years, though I could have made a lot more (bought and sold too often). My original purchase of AAPL was at $90 or thereabouts PRE 1:7 split. Too bad I "locked in my amazing gains" a year later.

I think AAPL is still a great investment. I am happy to own it as ~2-3% of the US portion of my stock portfolio. I think it will go higher still and will continue to be a cash printing machine for atleast the next few years.

The reason I don't own it individually is for two reasons :
1) Slippery slope into the whole buying individual securities and selling to market time, and facing fear, regret, second guessing, and risk of underperformance and all that.
2) I don't hold my own opinion in high enough regard to put my money where my mouth is. I am quite confident Apple will do great, specifically, out perform the S&P 500 as a whole.. but who cares what I think? I have no crystal ball.

AAPL was the laststock I sold too. I was tired of having Apple beat earnings and have the stock FALL! Apparently investors believed the company should have earned even more. Still like the company.

I like Apple product. My 1st computer is a Motorola based Macintosh SE. Now my kids like apple gadget. The stock is a great value and growth stock. I knew my Vanguard index fund has large portion of AAPL. But I still bought couple of share of AAPL. I used the unrealized gain purchased some new Apple products last couple of years. I am still holding it.

Apple was a large percentage of my portfolio and when I found Bogleheads a few years ago, I started selling to buy total stock market. Fortunately (so far), I wasn't too keen on paying the LTCG taxes on my small investment from 2004 so I have only sold a portion of my holdings. It still makes up around 20% of my portfolio and I continue trying to knock it down every year.

Interesting article, thanks. AAPL has grown to be 17% of my portfolio which is too much of a risk, I suppose. But I really don't need the money, maybe never will, so I'm going to let it ride for now. It's my last individual stock holding.

I saw one argument against the purchase of AAPL. The point was that AAPL could be the next Nokia or Motorola. There are some similarities but I think AAPL has a much more diverse product base.

I don't really think so. Apple is almost entirely dependent on smartphones and computers for their revenue. If either of those lines dries up for whatever reason, they'll be in mega-trouble.

A problem with investing in the very largest companies in the world is that, historically, they tend to underperform the rest of the market significantly going forward. This is a recognized problem with market cap-weighted large cap funds: they are strongly tilted toward the largest companies, and these companies aren't likely to perform as well as the rest of the market. This isn't a huge deficiency, but Guggenheim's equal-weighted S&P 500 fund has outperformed the S&P 500 on a market cap-weighted basis by about 1% annually over the former's lifespan.

“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Apple's performance as a company is simply mind boggling. They turn a $400,000 per year profit on each of their 123,000 employees. 488/500 companies in the S&P have a market cap less than the $267 billion in cash that Apple has.

"Compound interest is the most powerful force in the universe." - Albert Einstein

I’ve got about 3% of my portfolio in this individual stock, with an average purchase price of $95 a share a couple years ago. So I’ve done well with it. Apple has tons of cash, so I see it continuing to increase its dividends. iPhones are lasting longer and longer and people no longer buy the new one every year so unless they can capture an enormous market share in China and India, they may have trouble going forward.

I’ve got about 3% of my portfolio in this individual stock, with an average purchase price of $95 a share a couple years ago. So I’ve done well with it. Apple has tons of cash, so I see it continuing to increase its dividends. iPhones are lasting longer and longer and people no longer buy the new one every year so unless they can capture an enormous market share in China and India, they may have trouble going forward.

Apple quietly became a service company. Get everyone an iPhone then sell them the ecosystem—iCloud storage, Apple Music, apps, movies etc. If you think profit margins on an iPhone are big, imagine what it is for online iCloud storage. Make the ecosystem incredible sticky so you gravitate towards more products in the ecosystem. Next thing you know you have 3 or 4 Apple devices and it’s incredibly expensive to get out. And maybe you aren’t buying a new iPhone every year. But you buy one every 3 years, and an iPad every 3 or 4 years, and a Macbook every 6 years, and an updated Apple TV every 4 years and next thing you know you’re on average buying a new Apple device every year.

It’s funny, everyone keeps doubting the company, saying they have no new ideas, saying it would decline once Steve Jobs passed away...and all they do is print money at greater amounts quarter after quarter, year after year.

Does anyone know what Price he paid and who sold him the shares? I am guessing he didn't pay market value.

This should be public information readily available but I didn't see any news article mention this. Just wondering the mechanics of such a large transfer.

Of course he paid market value. Apple trades north of 30 million shares a day. You could dump 75 million shares over the course of a couple weeks and get market value for all of it. Why would you take a haircut?